More than 80% of the S&P 500 index’s companies have reported second-quarter results so far, and at least five key takeaways have emerged — including that Wall Street was far more worried about the coming earnings season than it needed to be.
Since the July 14 close, however, the S&P 500 has bounced back by more than 10%, as year-over-year earnings growth has exceeded expectations, with a beat rate that is above historical averages. And perhaps more importantly, the earnings growth estimate for the third quarter has nearly doubled in recent months.
About 70% of the reported companies beat revenue expectations, according to Refinitiv, compared with the long-term beat-rate average of 62%. In aggregate, revenue has come in 2.8% above expectations, more than double the long-term average of 1.2%. At Caterpillar Inc. CAT, +0.95%, for example, management said supply chain with words like “challenges,” “constraints,” “disruptions” or “pressures” 19 times during the prepared-remarks part of the post-earnings conference call with analysts, according to a FactSet transcript.
“So you have a choice: maintain very high levels of inventory due to the long supply chain or have your supply chain closer to your customers, elevate your agility and resiliency to better serve those customers. We believe being closer to the customer is the right answer.” Lütke announced just prior to Shopify’s earnings report that the company would be cutting 10% of jobs. The subsequent earnings report was noticeably devoid of a previously mentioned objective to reinvest all gross-profit dollars back into the business.PayPal Holdings Inc. PYPL, -1.
“Last year, we staffed many of our operations functions under the assumption that the heightened retail engagement we had been seeing with the stock and crypto markets in the COVID era would persist into 2022,” Chief Executive Vlad Tenov said in a Tuesday blog post. Chief Financial Officer Rachel Ruggeri explained on the post-earnings conference call with analysts, according to a FactSet transcript, that the rise in average ticket was driven by “strategic pricing actions,” which means higher prices, and “strong food attach,” which means more people are buying food to go with their coffee.The package delivery giant said daily package volume in its U.S. Domestic Package segment fell 4.0%, driven by an 8.2% drop in residential volume.
Or look at AT&T Inc. T, +0.44%, which disclosed that some wireless customers are taking slightly longer to pay their bills. Chief Executive Stephen Squeri of American Express Co. AXP, +0.41% said on an earnings call that he and his team “continue to see no significant signs of stress in our consumer base.”
“It’s critically important that you all understand we are not currently seeing any measurable reduction in customer spending or any evidence of customer’s trading down,” Chief Executive Howard Schultz said on the company’s earnings call. One driver of that, in his view, is the “premium nature of our beverage and food offerings.”